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Tax Policies for Low-Carbon Technologies

  • Metcalf, Gilbert E.

This paper discusses the difficulties of achieving climate change policy goals with low-carbon subsidies as opposed to using taxes to raise the price of carbon-intensive activities. First, subsidies lower the cost of energy, and thus encourage consumer demand responses that work in opposition to the goal of reducing emissions. Second, it is difficult to achieve technology neutrality with subsidies. Third, many subsidies are inframarginal. Finally, subsidies often suffer from unintended interactions with other policies. The paper concludes with some observations on the use of price-based instruments and discusses how a carbon tax could be designed to achieve environmental goals over a control period.

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Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 62 (2009)
Issue (Month): 3 (September)
Pages: 519-33

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Handle: RePEc:ntj:journl:v:62:y:2009:i:3:p:519-33
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  1. Stephen P. Holland & Christopher R. Knittel & Jonathan E. Hughes, 2007. "Greenhouse Gas Reductions under Low Carbon Fuel Standards?," NBER Working Papers 13266, National Bureau of Economic Research, Inc.
  2. Gilbert E. Metcalf, 2006. "Federal Tax Policy Towards Energy," NBER Working Papers 12568, National Bureau of Economic Research, Inc.
  3. Lucas W. Davis & Matthew E. Kahn, 2008. "International Trade in Used Durable Goods: The Environmental Consequences of NAFTA," NBER Working Papers 14565, National Bureau of Economic Research, Inc.
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